COMMEN TAX FILING PROBLEMS DONE BY FOREIGNERS

Taxes in the United States are cumbersome, especially for foreign students who are new to the country looking to study at an academic institution. This is why we see many Non-Resident Aliens and their classmates making various errors when filling out the tax application form when reporting tax to the IRS.

Here are some common mistakes made by non-resident foreigners in tax declaration in the United States.

NON-RESIDENT ALIEN (NON-RESIDENT ALIEN STATUS) IS DECLARED AS RESIDENT ALIEN

In the United States, different tax filing identities require different forms to be filled out. This is how we have different taxation. Resident foreigners are required to fill in Form 1040 while the Non-resident foreigners are required to fill in Form 1040NR. Wrong tax status will cause the amount of your tax return to change. If you report an error, you are likely to owe taxes without knowing it or even pay unnecessary taxes. The IRS imposes fines on taxes owed. There are two types of fines for taxes owed. They are;

The fine for failing to pay taxes owed or missing taxes on time; the monthly fine is 0.5%.

The fine for failing to file the tax returns on time; the monthly fine is 5%.

The two fines are accumulated every month, but the sum is not a small sum. At the same time, the IRS has a three-year recovery period for your tax forms, which means that everyone has the right to audit and question your tax forms within three years of submitting them. No one wants to be unlucky, because the IRS can always come to your door with your wrong tax form. Students should know how to distinguish Resident Alien from Non-resident Alien. According to the IRS, if you are an alien (not a U.S. citizen), you are considered a non-resident alien unless you meet one of two criteria. It is either you meet the green card test or the substantial presence test for the calendar year. It is then that you can be considered a resident alien of the United States for tax purposes.

W-4 FORM WAS NOT FILLED OUT CORRECTLY ON THE FIRST DAY OF WORK

Form W-4 is a certificate of employee withholding allowance, in order to let employers know how much salary should be withheld for employees. A common employer withholding tax is Federal Insurance Contributions Act (FICA) tax (more than 7% of your annual salary).

However, F, J, M and Q type non-resident foreign students, scholars, teachers, etc., are not required to pay FICA tax for legal work under a visa. If you are a student and you are working on campus, you do not need to pay FICA tax regardless of your tax status. If you are exempt from FICA, the summer internship income is only $6,000, and incorrectly filling out the W-4 form will result in more than $400 of FICA tax deduction. Many foreign students with non-resident alien tax declaration status incorrectly fill out the W-4 form on the first day of employment, and do not declare to the company that they are a non-resident alien, which directly causes the company to withhold your FICA tax by mistake.Even if FICA was deducted by mistake, it can be recovered. This can be seen on the IRS official website.

 FORGOT TO FILL IN FORM 8843

Most international students are non-resident foreigners who have tax filing status and no income, so there is only one form to be filed for tax filing: Form 8843. Form 8843 is a form for collecting personal information, including personal visa information, US immigration records, and U.S. projects.

Failure to submit Form 8843 may leave your identity in the United States as a hidden danger to be questioned by the government. Form 8843 is due to end your [legal prosecution period]. The IRS has a three-year recovery period for your tax forms, that is, you have the right to audit and question your tax forms within three years of your filing. But if you have never paid a tax form, the three-year countdown of your statutory prosecution period has never started, so the Inland Revenue Department can be held responsible for failing to file a tax return while studying abroad.

Students are advised to take this seriously because during your stay in the United States, you must maintain a good record of yourself in the United States, obey local laws, file taxes on time, and do not leave yourself with the hidden danger of being questioned by the government. Form 8843 can be submitted even if you forget to fill it out. It is recommended that everyone make up for Form 8843 that they haven’t paid before when filing their taxes.

IGNORE THE UNITED STATES INCOME TAX TREATIES

The United States has tax treaties with a number of foreign countries. These treaties make sure residents of foreign countries are taxed at a reduced rate. The reduced rates and exemptions vary among countries and specific items of income. Many students do not know that they can also use the United States income Tax Treaty (tax agreement between your home country and the United States) to obtain an annual tax allowance. In fact, the Tax Treaty applies not only to non-resident foreigners, but also to resident foreigners. Regardless of whether you are a resident foreigner or a non-resident foreigner, as long as you are legally working under a Student/Trainer/Trainee visa status, there is a certain income tax allowance per year. According to the IRS, Most income tax treaties come with what is called a “saving clause”. This prevents a citizen or resident of the United States from using the provisions of a tax treaty in order to avoid taxation of U.S. source income.For specific Tax Treaty applicable rules and applications, students should familiarize themselves with them so they know what to do at the right time.

 

After reading the common filing mistakes explained above, it is expected we see very few cases of foreign students having issues with filing their taxes. All students should check their tax status to know if it is correct and make necessary adjustments if it is not.